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21) Georgia Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following
section of the comparative balance sheet:
Georgia Corp.
Comparative Balance Sheet
December 31, 2019 and 2018
2019
2018
Increase/(Decrease)
Cash
$45,000
$27,000
$18,000
Accounts Receivable
48,000
45,000
3,000
Merchandise Inventory
180,000
132,000
48,000
Total Assets
$273,000
$204,000
$69,000
How will the change in Accounts Receivable be shown on the statement of cash flows?
A) addition to net income under the operating activities section
B) subtraction from net income under the operating activities section
C) positive cash flow under the financing activities section
D) negative cash flow under the investing activities section
22) Utah Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following
section of the comparative balance sheet:
Utah Corp.
Comparative Balance Sheet
December 31, 2018 and 2017
2018
2017
Increase/(Decrease)
Cash
$45,000
$27,000
$18,000
Accounts Receivable
48,000
45,000
3,000
Merchandise Inventory
180,000
132,000
48,000
Total Assets
$273,000
$204,000
$69,000
How will the change in Merchandise Inventory be shown on the statement of cash flows?
A) addition to net income under the operating activities section
B) subtraction from net income under the operating activities section
C) positive cash flow under the financing activities section
D) negative cash flow under the investing activities section
23) Virginia Company uses the indirect method to prepare the statement of cash flows. Refer to the
following section of the comparative balance sheet:
Virginia Company
Comparative Balance Sheet
December 31, 2018 and 2017
2018
2017
Increase/(Decrease)
Accounts Payable
$4,000
$6,000
$(2,000)
Accrued Liabilities
2,000
1,000
1,000
Long-term Notes Payable
84,000
90,000
(6,000)
Total Liabilities
$90,000
$97,000
$(7,000)
How will the change in Accounts Payable be shown on the statement of cash flows?
A) as an addition to Net Income
B) as a deduction from Net Income
C) as a deduction from investing cash flows
D) as an addition to operating cash flows
24) Colorado Company uses the indirect method to prepare the statement of cash flows. Refer to the
following section of the comparative balance sheet:
Colorado Company
Comparative Balance Sheet
December 31, 2019 and 2018
2019
2018
Increase/(Decrease)
Accounts Payable
$4,000
$6,000
$(2,000)
Accrued Liabilities
2,000
1,000
1,000
Long-term Notes Payable
84,000
90,000
(6,000)
Total Liabilities
$90,000
$97,000
$(7,000)
How will the change in Accrued Liabilities be shown on the statement of cash flows?
A) as an addition to Net Income
B) as a deduction from Net Income
C) as a deduction from operating cash flows
D) as an addition to investing cash flows
25) Kentucky Company uses the indirect method to prepare the statement of cash flows. Refer to the
following income statement:
Kentucky Company
Income Statement
Year Ended December 31, 2019
Sales Revenue
$249,000
Interest Revenue
2300
Gain on Sale of Plant Assets
5300
Total Revenues and Gains
$256,600
Cost of Goods Sold
124,000
Salary Expense
43,000
Depreciation Expense
14,000
Other Operating Expenses
20,000
Interest Expense
1600
Income Tax Expense
5100
Total Expenses
207,700
Net Income (Loss)
$48,900
Additional information provided by the company includes the following:
1. Current assets, other than cash, increased by $21,000.
2. Current liabilities decreased by $1200.
Compute the net cash provided by (used for) operating activities.
A) $26,700
B) $40,700
C) $35,400
D) $11,800
26) Ohio, Inc. uses the indirect method to prepare the statement of cash flows. Refer to the following
income statement:
Ohio, Inc.
Income Statement
Year Ended December 31, 2018
Revenues and Gains:
Sales Revenue
$156,000
Interest Revenue
6000
Total Revenues and Gains
$162,000
Expenses and Losses:
Cost of Goods Sold
$140,000
Salary Expense
23,000
Depreciation Expense
7200
Other Operating Expenses
13,400
Interest Expense
16,200
Loss on Sale of Plant Assets
5000
Income Tax Expense
5500
Total Expenses and Losses
210,300
Net Income (Loss)
$(48,300)
Additional information provided by the company includes the following:
Current assets, other than cash, decreased by $5200.
Current liabilities increased by $2300.
Compute the net cash provided by (used for) operating activities.
A) $(28,600)
B) $(55,800)
C) $10,200
D) $33,600
27) In preparing a statement of cash flows using the indirect method, the Depreciation Expense ________.
A) is added back as an adjustment to Net Income in the operating activities section
B) is shown as a negative cash flow in the investing activities section
C) is added back to Purchases of Plant Assets under investing activities
D) is shown as a negative cash flow under operating activities
28) Which of the following will be listed in the operating section of the statement of cash flows that is
prepared using the indirect method?
A) collections from customers
B) payments to suppliers
C) interest received
D) increases/decreases in current liabilities
29) Nebraska Auto Parts Company uses the indirect method to prepare the statement of cash flows. Refer
to the following income statement:
Nebraska Auto Parts Company
Income Statement
Year Ended December 31, 2018
Sales Revenue $360,000
Interest Revenue 1,500
Gain on Sale of Plant Assets 6,000
Total Revenues and Gains $367,500
Cost of Goods Sold 165,000
Salary Expense 67,500
Depreciation Expense 18,000
Other Operating Expenses 34,500
Interest Expense 1,500
Income Tax Expense 7,500
Total Expenses 294,000
Net Income (Loss) $73,500
Additional information provided by the company includes the following:
Current assets other than cash increase by $36,000.
Current liabilities decrease by $1,500.
Prepare the operating activities section of the statement of cash flows.
30) Dakota Telescopes Company uses the indirect method to prepare the statement of cash flows. Refer to
the following income statement:
Dakota Telescopes Company
Income Statement
Year Ended December 31, 2019
Sales Revenue $275,000
Interest Revenue 2,600
Total Revenues $277,600
Cost of Goods Sold 135,000
Salary Expense 66,500
Depreciation Expense 32,000
Other Operating Expenses 35,900
Interest Expense 2,400
Income Tax Expense 6,500
Loss on Sale of Plant Assets 2,000
Total Expenses and Losses 280,300
Net Loss ($2,700)
Additional information provided by the company includes the following:
Current assets other than cash decreased by $25,000.
Current liabilities increased by $3,000.
Prepare the operating activities section of the statement of cash flows.
31) For each of the following items, relating to the adjustments made to reconcile net income to net cash
provided by operating activities section, state whether the adjustment is an increase or decrease to net
income.
Item
Adjustment to Net Income on
Statement of Cash Flows
Losses on Disposal of Long-
term Assets
Decreases in Current Liabilities
Amortization Expense
Increases in Current Assets
other than Cash
32) For each of the following items, relating to the adjustments made to reconcile net income to net cash
provided by operating activities section, state whether the adjustment is an increase or decrease to net
income.
Item
Adjustment to Net Income on
Statement of Cash Flows
Depreciation Expense
Decreases in Current Liabilities
Gains on Disposal of Long-term
Assets
Increases in Current Assets
other than Cash
